OECD Economic Survey of India 2011 - Only seven governments in world spend less on health than India
PRESENTING the Economic Survey of India in New Delhi yesterday, OECD Secretary-General Angel Gurría said: “Policymakers are to be commended on the remarkable catch-up achieved in recent years, making India one of main driving forces of the global economy.” He added: “The priority given to more socially inclusive economic growth is appropriate and further reforms are needed to achieve it.
Highlights of the Survey Report:
Sustaining higher growth. Administrative burdens have held back the expansion of private firms and these impediments need to be eased. Public-sector governance should be made more transparent and accountable by separating operational and regulatory functions in the provision of public services and by strengthening the anti-corruption agency. Further reductions in trade and FDI barriers are also needed.
Improving fiscal policy and outcomes. The government resumed fiscal consolidation in 2010 and more is planned for 2011. The government needs to ensure subsidies stemming from higher world oil prices do not throw these plans off course. A binding medium-term framework is also needed, presenting the budget on a rolling three-year basis and with rules to limit deficit spending. An independent fiscal monitoring agency might strengthen fiscal discipline. The proposed goods and services tax is an important reform, and its coverage should be as broad as possible to minimise distortions.
Making growth more inclusive. Poverty rates continue to fall but remain high despite strong growth: making growth more inclusive is therefore a top government priority. The introduction of the national rural employment guarantee has helped. However, only seven governments in the world spend less on health than India (in per cent of GDP). Government spending is higher in other areas aimed at lowering poverty, such as subsidisation of kerosene, liquefied petroleum gas and fertilisers. However, a large part of such outlays do not reach the poor. More widespread use of cash transfers conditional on participation in health and education programmes could boost outcomes in these areas.
Continuing with financial sector reform. India's financial sector proved resilient in the face of the global crisis. The government is committed to further financial reforms to deepen the financial system and improve access. The entry of new privately-owned banks has heightened competition in the sector and yielded efficiency gains. Granting more banking licences would help in this regard. Reforms are called for to ease wide-ranging and highly prescriptive operating constraints faced by the financial sector for lending, portfolio management and branch location.
Improving education access and quality. Enrolment and literacy are improving and the 2009 Right to Education Act should help to speed up progress towards universal elementary education. However, high dropout rates, low student attendance and teacher absence remain severe problems, holding back educational achievements. Teacher effectiveness in the public sector ought to be enhanced through better accountability, incentives and development pathways. In higher education regulation is often ineffective, restricting choice and hampering entry and innovation. Institutions ought to be granted greater autonomy, quality assessment should be strengthened and a higher proportion of funding tied to outcomes.